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By Pratish Narayanan & Richard Frost
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Asian stocks fell as China property companies slumped after the government ordered measures to cool prices. The yen strengthened against all its major peers, while Japanese and Indian bonds gained.
The MSCI Asia Pacific Index (MXAP) lost 0.7 percent at 12:46 p.m. in Hong Kong, as developers led a 2.9 percent decline by the Shanghai Composite Index. The New Zealand Exchange 50 Gross Index dropped 1.5 percent. Standard & Poor’s 500 Index futures retreated 0.5 percent. The Nikkei 225 Stock Average pared gains of as much as 1.4 percent, and was up 0.4 percent. Gold pared earlier increases and zinc erased gains. China’s cabinet ordered higher down payments and interest rates for second-home mortgages in some cities, as parliament gathered for an annual meeting. Haruhiko Kuroda said the Bank of Japan should refrain from directly underwriting government debt, highlighting the potential for even expanded action by the central bank to disappoint some investors.
“People are a little bit worried that instead of good policies we might see more of these strict policies from the National People’s Congress,” said Jackson Wong, vice president at Hong Kong-based brokerage Tanrich Securities Co. The property measures “indicate the central government is not hesitant to combat any bubbles.”
Almost four stocks dropped for each that rose on MSCI’s Asia ex-Japan gauge. Hong Kong’s Hang Seng Index slid 1.3 percent. Australia’s S&P/ASX 200 Index lost 1.5 percent. South Korea’s Kospi retreated 0.6 percent and India’s BSE Index fell 0.7 percent.
Chinese Developers
The Shanghai Stock Exchange Property Index (SHPROP) plunged 9 percent, headed for its biggest loss since June 2008. Beijing Capital Development Co. and Shanghai Jinqiao Export Processing Zone Development Co. tumbled 10 percent. The People’s Bank of China’s regional branches may implement the mortgage measures in accordance with the price-control targets of local governments, the State Council, or Cabinet, said. Cities facing “relatively large” pressure from rising house prices must further tighten home-purchase limits, according to the statement.
The yen strengthened 0.3 percent to 93.35 per dollar, rallying from its 1.9 percent loss in previous four sessions. Kuroda, the nominee to become the next Bank of Japan governor, pledged more monetary easing to defeat deflation. Japan’s bonds rose, pushing 10-year yields to the lowest since 2003, after Kuroda said he would consider starting the central bank’s open- ended asset purchases sooner. The benchmark yield fell three basis points to 62 basis points.
“Risk-Off Environment”
European finance ministers meet in Brussels today as a top aide to Italy’s Democratic Party leader Pier Luigi Bersani said the country may need to hold another election this year. U.S. President Barack Obama is negotiating with lawmakers to address $1.2 trillion in expenditure reductions spread over nine years as part of a 2011 deal to increase the debt limit.
“The risk-off environment and uncertainties about Europe permeating the market at the moment are adding to demand for the yen,” said Jim Vrondas, the Sydney-based chief currency and payment strategist at OzForex Ltd. “Traders are being squeezed out of positions betting on yen declines and we think this yen strength has longer to run as they continue to unwind positions.”
The won fell 0.7 percent from its Feb. 28 close to 1,092.50 per dollar, while the Indian rupee fell 0.3 percent to 55.06. China’s services industries expanded at the slowest pace since September, adding to signs a recovery in the world’s second- biggest economy is moderating. The non-manufacturing Purchasing Managers’ Index fell to 54.5 in February from 56.2 in January, official reports showed. The index’s reading has been above 50, which indicates expansion, for at least two years.
“China data was disappointing,” said Jeon Seung Ji, a Seoul-based currency analyst at Samsung Futures Inc.
Indian Bonds
Indian bonds gained, halting a two-day loss, on speculation the central bank will reduce interest rates this month to spur economic growth. The yield on 10-year bonds dropped two basis points to 7.89 percent.
The cost of insuring Japanese corporate bonds from non- payment fell, according to traders of credit-default swaps. The Markit iTraxx Japan index decreased two basis points to 121 basis points. The opposition Democratic Party of Japan will approve the appointment of Kuroda, Jiji reported, citing the party’s Secretary General. The Asian Development Bank president would take office after Governor Masaaki Shirakawa retires March 19, if confirmed by parliament.
To contact the reporters on this story: Pratish Narayanan in Mumbai atpnarayanan9@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
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